The Chancellor of the Exchequer has included a number of business rates announcements in his Autumn Budget 2021. Perhaps the most eagerly awaited of these was the outcome of the Government’s “Fundamental Review of Business Rates” originally announced in the Spring Budget 2020, to report for the Autumn Statement that year, but delayed until now. In the event this review appears to “have laboured mightily and produced a mouse”.
There is to be no fundamental change to business rates. From 2023 there will be three-yearly business rates revaluations, as opposed to the current, normal, five-yearly revaluations. Instead of major change, the Chancellor announced that “The government will also continue to explore the arguments for and against a UK-wide Online Sales Tax, the revenue from which would be used to reduce business rates for retailers with properties in England and with the block grants of the Devolved Administrations increased in the usual way. The government will publish a consultation shortly”.
Other changes to take effect from 2023 include a rates freeze on building improvements and further rates reliefs for green energy production. The rates freeze will introduce a 100% improvement relief for business rates. The Chancellor says that “This will provide 12 months relief from higher bills for occupiers where eligible improvements to an existing property increase the rateable value. The government will consult on how best to implement this relief, which will take effect in 2023 and be reviewed in 2028”. The relief for green energy will be introduced from 1 April 2023 until 31 March 2035 and will provide “targeted business rate exemptions for eligible plant and machinery used in onsite renewable energy generation and storage, and a 100% relief for eligible heat networks, to support the decarbonisation of non-domestic buildings”.
These appear to be the sum total of more than 18-months work on a “Fundamental Review”, and, as such, can only be described as laughable. None of these changes addresses either of the two fundamental problems with the business rates system as it stands, which are that the burden of the tax is far too high, whether measured in relation to other corporate taxes or in relation to property taxes in competing economies, and that the system itself it ridiculously overcomplicated. The changes announced will not reduce the existing burden of the tax, and will only add to its complication. Ratepayers will be hugely disappointed with this outcome and we can only expect their calls for the scrapping of the business rates system to be redoubled.
The Autumn Budget also contains a number of shorter-term announcements relating to business rates. The business rates multipliers in England will be frozen at the current level for 2022/23, that is to say at 49.9 pence for “small” properties (those with a rateable value under £51,000) and at 51.2 pence for other properties. It remains to be seen whether the devolved administrations in Scotland and Wales will follow suit with similar freezes in their multipliers.
The current scheme of transitional adjustments, which ends on 31 March 2022, will be extended for small and medium-sized businesses, and the supporting small business scheme, for one year. This will restrict bill increases to 15% for small properties (up to a rateable value of £20,000 or £28,000 in Greater London) and 25% for medium properties (up to a rateable value of £100,000), subject to subsidy control limits.
There will also be a new, temporary, business rates relief for eligible retail, hospitality and leisure properties for 2022-23. Eligible properties will receive 50% relief, up to a £110,000 per business cap. It appears that this is a more limited extension of current COVID-related rates reliefs. Associated with this is an extension to the Airports and Ground Operations Support Scheme (AGOSS). The government is extending the AGOSS for a further six months, through to the end of the 2021/22 financial year. This will provide commercial airports and ground handlers in England with support for their fixed costs of up to £4 million, capped at their business rates liabilities over this period, and subject to appropriate conditions.
And finally, to show even more clearly that the Government has no real intention of trying to reduced the fiscal burden of business rates, the Chancellor has announced that “the government is investing in the Valuation Office Agency (VOA) to upgrade digital capabilities and ensure a high-quality service for taxpayers. The settlement increases the VOA’s annual budget to more than £170 million by 2024-25, with the VOA receiving more than £500 million over the next three years”. No doubt the Chancellor expects a return on this investment.
We have been critical of a number of recent Budget statements for failing to grasp the nettle of dealing with the two biggest problems with the business rates system – the excessive burden of the tax on property-intensive business, and its ridiculous complexity. This latest statement is an even worse disappointment to ratepayers than those that have gone before. The greater disappointment is because we had hope that the “Fundamental Review of Business Rates” might, at last, look at those two issues. It has failed even to look at them, much less to address them. The Review, formerly known as Fundamental….